-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OEf7Ih71/2Ymobh3i/LFz7SHbrkohnNMULA4fIocF41f58BKihcVKZ9UIG/qZWxY GuT7MuXur3Nlg6Akb9dpvg== 0000950130-02-003567.txt : 20020514 0000950130-02-003567.hdr.sgml : 20020514 ACCESSION NUMBER: 0000950130-02-003567 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERTAN INC CENTRAL INDEX KEY: 0000803227 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RADIO TV & CONSUMER ELECTRONICS STORES [5731] IRS NUMBER: 752130875 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10062 FILM NUMBER: 02645558 BUSINESS ADDRESS: STREET 1: 3300 HGWY #7 STREET 2: STE 904 CITY: CONCORD ONTARIO CAN STATE: TX ZIP: 76102 BUSINESS PHONE: 9057609701 MAIL ADDRESS: STREET 1: 201 MAIN ST STREET 2: STE 1805 CITY: FORT WORTH STATE: TX ZIP: 76102 10-Q 1 d10q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION ---------------------------------- Washington, D.C. 20549 FORM 10-Q - ------------------------------------------------------------------------------- (Mark One) [ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2002 or -------------- [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______________ to _______________ Commission file number 1-10062 ------- InterTAN, Inc. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 75-2130875 - ----------------------------------------- ----------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 279 Bayview Drive Barrie, Ontario Canada L4M 4W5 - -------------------------------------------- ------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (705) 728-6242 ------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ --- At April 30, 2002, 23,363,680 shares of the registrant's common stock, par value $1.00 per share, were outstanding. PART I
Page Introductory note regarding forward-looking information 3 ITEM 1 - Financial Statements and Supplementary Data Consolidated Statements of Operations 4 Consolidated Balance Sheets 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II ITEM 1 - Legal Proceedings 24 ITEM 4 - Submission of Matters to a Vote of Security Holders 24 ITEM 6 - Exhibits and Reports on Form 8-K 24 OTHER Signatures 26
2 INTRODUCTORY NOTE REGARDING FORWARD-LOOKING INFORMATION Certain statements in this Report on form 10-Q constitute forward-looking statements that involve risks and uncertainties. The forward-looking statements include statements regarding: o The resolution of the Company's dispute with the purchaser of its former subsidiary in Australia. o The outcome of various Australian, Canadian and United States income tax issues and the timing of payments related thereto. o The resolution of the legality of the activities of gray marketers in the Canadian satellite market. o The impact of the Battery Plus acquisition on sales. o The impact of the continued shift in consumer preferences towards digital technologies on sales and margins. o Future levels of interest income and expense. o The ability of the Company's inventory management program to positively impact obsolescence risk and improve cash flow. o The adequacy of the Company's liquidity. o The adequacy of the indemnity obtained from the purchaser of the Company's former subsidiary in the United Kingdom. o Possible payments under indemnities provided to the purchaser of InterTAN Australia Ltd. o Forecasted capital expenditures for fiscal year 2002. o Estimates of cash required to fund the repurchase of common stock. Important factors that could cause actual results to differ materially from those indicated in the forward-looking statements include, but are not limited to: o Rulings of Courts and the activities of government and regulatory bodies. o International political, military and economic conditions. o Interest and foreign exchange rate fluctuations. o Actions of United States and foreign taxing authorities, including computations of balances owing. o Changes in consumer demand and preference. o Consumer confidence. o Competitive products and pricing. o Availability of products. o Inventory risks due to shifts in market conditions. o Dependence on manufacturers' product development. o The regulatory and trade environment. o The value of the Company's common stock and the general condition of the stock market. o Real estate market fluctuations and o Other risks indicated in InterTAN's previously filed periodic reports with the Securities and Exchange Commission, including its Form 10-K for the 2001 fiscal year. These risks and uncertainties are beyond the ability of the Company to control, and in many cases the Company cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. 3 ITEM 1 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CONSOLIDATED STATEMENTS OF OPERATIONS (U.S. dollars in thousands, except per share data) (Unaudited)
Three months ended Nine months ended March 31 March 31 2002 2001 2002 2001 - ----------------------------------------------------------------------------------------------------------------------------- Net sales and operating revenues $ 82,678 $103,526 $308,874 $ 387,527 Other income (loss) 1 18 (1) 109 - ----------------------------------------------------------------------------------------------------------------------------- 82,679 103,544 308,873 387,636 Operating costs and expenses: Cost of products sold 49,662 60,646 187,418 232,747 Selling, general and administrative expenses 26,700 34,848 87,101 115,763 Depreciation and amortization 1,388 1,661 4,148 4,882 Restructuring charge - - 3,213 - - ----------------------------------------------------------------------------------------------------------------------------- 77,750 97,155 281,880 353,392 - ----------------------------------------------------------------------------------------------------------------------------- Operating income 4,929 6,389 26,993 34,244 Foreign currency transaction gains (losses) (33) (16) 262 (268) Interest income 266 288 1,301 917 Interest expense (102) (80) (302) (731) - ----------------------------------------------------------------------------------------------------------------------------- Income before income taxes 5,060 6,581 28,254 34,162 Income taxes 2,448 3,176 12,928 15,268 - ----------------------------------------------------------------------------------------------------------------------------- Net income $ 2,612 $ 3,405 $ 15,326 $ 18,894 - ----------------------------------------------------------------------------------------------------------------------------- Basic net income per average common share $ 0.11 $ 0.12 $ 0.59 $ 0.68 Diluted net income per average common share $ 0.11 $ 0.12 $ 0.58 $ 0.66 - ----------------------------------------------------------------------------------------------------------------------------- Average common shares outstanding 24,175 27,939 25,900 27,905 Average common shares outstanding assuming dilution 24,670 28,559 26,371 28,637 - -----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. 4 CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands, except share amounts) (Unaudited)
March 31 June 30 March 31 2002 2001 2001 - ----------------------------------------------------------------------------------------------------------------------------------- Assets Current Assets Cash and short-term investments $ 36,601 $ 86,233 $ 38,662 Accounts receivable, less allowance for doubtful accounts 14,111 12,598 14,883 Inventories 82,497 90,394 105,894 Other current assets 1,975 1,151 1,229 Deferred income taxes 2,174 2,290 2,135 - ----------------------------------------------------------------------------------------------------------------------------------- Total current assets 137,358 192,666 162,803 Property and equipment, less accumulated depreciation and amortization 22,438 19,817 24,393 Other assets 336 16 24 Deferred income taxes 2,878 3,031 2,331 - ----------------------------------------------------------------------------------------------------------------------------------- Total Assets $ 163,010 $ 215,530 $ 189,551 - ----------------------------------------------------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Current Liabilities Accounts payable $ 13,227 $ 20,034 $ 19,951 Accrued expenses 15,726 13,650 14,736 Income taxes payable 15,600 24,913 24,592 Deferred service contract revenue - current portion 5,656 5,507 6,060 - ----------------------------------------------------------------------------------------------------------------------------------- Total current liabilities 50,209 64,104 65,339 Deferred service contract revenue - non current portion 4,896 4,599 5,193 Other liabilities 2,400 2,518 5,038 - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities 57,505 71,221 75,570 - ----------------------------------------------------------------------------------------------------------------------------------- Stockholders' Equity Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding - - - Common stock, $1 par value, 40,000,000 shares authorized, 31,857,135, 31,225,048 and 31,078,496, respectively, issued 31,857 31,225 31,078 Additional paid-in capital 155,932 151,744 149,771 Common stock in treasury, at cost, 8,518,692, 3,101,818 and 3,102,178 shares, respectively (89,182) (35,405) (35,403) Retained earnings 29,078 13,752 9,119 Accumulated other comprehensive loss (22,180) (17,007) (40,584) - ----------------------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 105,505 144,309 113,981 - ----------------------------------------------------------------------------------------------------------------------------------- Commitments and contingencies (See Notes 3, 8 and 9) Total Liabilities and Stockholders' Equity $ 163,010 $ 215,530 $ 189,551 - -----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. 5 CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended (U.S. dollars in thousands) March 31 (Unaudited) 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income $ 15,326 $ 18,894 Adjustments to reconcile net income to cash used in operating activities: Depreciation and amortization 4,148 4,882 Stock-based compensation 1,013 950 Other 16 2 Cash provided by (used in) assets and liabilities: Accounts receivable (2,071) (3,454) Inventories 3,228 4,951 Other current assets (897) (147) Accounts payable (5,881) (4,033) Accrued expenses 2,556 224 Income taxes payable (8,191) (3,789) Deferred service contract revenue 972 1,135 - ------------------------------------------------------------------------------------------------------------------------------ Net cash provided by (used in) operating activities 10,219 19,615 - ------------------------------------------------------------------------------------------------------------------------------ Cash flows from investing activities: Additions to property and equipment (7,902) (9,799) Proceeds from sales of property and equipment 124 384 Other investing activities (372) 110 - ------------------------------------------------------------------------------------------------------------------------------ Net cash used in investing activities (8,150) (9,305) - ------------------------------------------------------------------------------------------------------------------------------ Cash flows from financing activities: Proceeds from issuance of common stock to employee plans 1,203 1,448 Proceeds from exercise of stock options 2,394 410 Purchase of treasury stock (53,567) (15,373) - ------------------------------------------------------------------------------------------------------------------------------ Net cash used in financing activities (49,970) (13,515) - ------------------------------------------------------------------------------------------------------------------------------ Effect of exchange rate changes on cash (1,731) (2,883) - ------------------------------------------------------------------------------------------------------------------------------ Net decrease in cash and short-term investments (49,632) (6,088) Cash and short-term investments, beginning of year 86,233 44,750 - ------------------------------------------------------------------------------------------------------------------------------ Cash and short-term investments, end of year $ 36,601 $ 38,662 - ------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 BASIS OF FINANCIAL STATEMENTs The accompanying unaudited financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X, "Interim Financial Statements", and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. The financial statements have been prepared in conformity with accounting principles and practices (including consolidation practices) as reflected in InterTAN, Inc.'s ("InterTAN" or the "Company") Annual Report on Form 10-K for the fiscal year ended June 30, 2001, and, in the opinion of the Company, include all adjustments necessary for a fair presentation of the Company's financial position as of March 31, 2002 and 2001 and the results of its operations for the three and nine months ended March 31, 2002 and 2001 and its cash flows for the nine months ended March 31, 2002 and 2001. Such adjustments are of a normal and recurring nature. Operating results for the three and nine months ended March 31, 2002 are not necessarily indicative of the results that can be expected for the fiscal year ending June 30, 2002. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2001. NOTE 2 NEW ACCOUNTING STANDARDS In June 2001, the FASB issued Financial Accounting Standards Nos. 141 and 142 ("FAS 141" and "FAS 142"). FAS 141 provides for new rules to be used in accounting for business combinations and is effective for business combinations initiated after June 30, 2001. FAS 142 changes the accounting treatment of both existing and newly-acquired goodwill. FAS 142 is effective for fiscal years beginning after December 15, 2001. However, early adoption is permitted. The Company adopted both of these new accounting standards in the first quarter of fiscal year 2002. The adoption of FAS 141 and FAS 142 did not have a material effect on the Company's financial statements. NOTE 3 DISPOSAL OF AUSTRALIAN SUBSIDIARY During the fourth quarter of fiscal year 2001, the Company sold its former subsidiary in Australia. The consolidated balance sheet as at March 31, 2001 and the consolidated statements of operations and cash flows for the three and nine months then ended include the results of the Australian subsidiary. The gain on disposal reported in the fourth quarter of fiscal year 2001 was based on management's calculation of certain adjustments to be paid following completion of the sale. The purchaser has advised the Company that it disagrees with management's calculation of those adjustments and has commenced legal action in support of its claim. Management believes that its calculation of the adjustments is appropriate and that there are strong arguments against the position adopted by the purchaser and is in the process of vigorously defending its position. Should the purchaser prevail in this dispute, the Company would have an additional liability of approximately $2,000,000. Under the terms of the sale agreement, during the nine-month period following the sale, which period ended January 31, 2002, the Company indemnified the purchaser against any inaccuracies in the financial statements of the former Australian subsidiary as of the date of sale. Except as noted above, no claims were made under this indemnity within the prescribed time period. Layered on top of this indemnity is a two-year indemnity covering tax matters only and which expires April 30, 2003. This indemnity has a limit of A$4,000,000 (approximately $2,000,000). To date, no claims have been made under this tax indemnity. In addition, the Company indemnified the purchaser against termination costs with respect to certain employees. One claim has 7 been received under this indemnity for an amount of approximately $60,000. The time for making additional claims under this indemnity has now expired. Management believes there are authoritative arguments in support of the position that this transaction is exempt from Australian capital gains tax by virtue of the tax treaty between the United States and Australia, and, accordingly, no Australian tax was recorded with respect to the sale. However, there can be no assurance that the Australian tax authorities will not challenge this position. If Australian tax were to apply to the gain on sale, the Company would have an additional liability of approximately $7,000,000. NOTE 4 RESTRUCTURING CHARGE During the first quarter of fiscal year 2002, the Company recorded a restructuring charge of $3,213,000. Approximately $500,000 of this charge related to the write-off of costs incurred in connection with the study of various alternatives to enhance shareholder value. This study began during fiscal year 2001 and was concluded during the first quarter of fiscal year 2002. The remainder represented the cost of restructuring the Company's Board of Directors and streamlining the Company's Corporate Office and integrating it with InterTAN's operating subsidiary, InterTAN Canada Ltd. The following is a summary of activity within this reserve during fiscal year 2002:
Balance Balance June 30 Provision March 31 (U.S. dollars in thousands) 2001 Recorded Paid 2002 - ----------------------------------------------------------------------------------------------------------------------- Professional fees and related expenses $ - $ 510 $ 510 $ - Retirement, severance and other compensation costs - 2,659 860 1,799 Other charges - 44 44 - - ----------------------------------------------------------------------------------------------------------------------- $ - $ 3,213 $ 1,414 $ 1,799 - -----------------------------------------------------------------------------------------------------------------------
In April 2002, the Company announced a further restructuring of its merchandising and marketing groups and to streamline the decision making process and to optimize responsiveness. In connection with this restructuring, the Company will record a charge of less than $0.01 per share during the fourth quarter. NOTE 5 TREASURY STOCK REPURCHASE PROGRAM By June 30, 2001, the Company had completed two previously announced share repurchase programs. Under the two programs combined, a total of 3,000,000 shares were acquired at an aggregate cost of $34,162,000. During the first quarter of fiscal year 2002, the Company's Board of Directors announced a third share repurchase program under which management was authorized to purchase up to 2,800,000 shares of the Company's common stock. This program was completed early in the second quarter, with all 2,800,000 shares acquired at an average cost of $8.27 per share. On October 25, 2001, the Company's Board of Directors announced a fourth share repurchase program. Under this program, management was authorized, subject to appropriate market conditions, to repurchase up to 2,600,000 shares of the Company's common stock, approximately 10% of shares then outstanding. By December 31, 2001, 764,700 shares had been acquired under this plan at an aggregate cost of $8,221,000. During the third quarter, the remaining 1,835,300 shares were purchased for a total additional consideration of $22,201,000. The average cost of all shares acquired 8 under this plan was $11.70 per share, including commissions. Since the Company announced its first repurchase program in the third quarter of fiscal year 2000, the Company has purchased 8,400,000 shares for aggregate consideration of approximately $87,700,000, in excess of 25% of the shares outstanding at the inception of the first program. In May 2002, the Company's Board of Directors announced a fifth share repurchase program under which management is authorized, subject to market conditions, to purchase up to an additional 1,200,000 shares, approximately 5% of the shares then outstanding. NOTE 6 NET INCOME PER AVERAGE COMMON SHARE Basic earnings per share ("EPS") is calculated by dividing the net income or loss for a period by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted. Basic and diluted net income per average common share and a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation is set out below:
Three months ended March 31 ---------------------------------------------------------------------------------- (U.S.dollars in thousands, 2002 2001 ----------------------------------------- ---------------------------------------- except for per share data) Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ----------------------------------------- ---------------------------------------- Net income $ 2,612 $ 3,405 ============ ============= Basic EPS Income available to common stockholders $ 2,612 24,175 $ 0.11 $ 3,405 27,939 $ 0.12 ========= ========== Effect of Dilutive Securities Stock options - 495 - 620 ------------ ------------ ------------- ----------- Diluted EPS Income available to common stockholders including assumed conversions $ 2,612 24,670 $ 0.11 $ 3,405 28,559 $ 0.12 ============ ============ ========= ============= =========== ==========
9
Nine months ended March 31 ---------------------------------------------------------------------------------- (U.S.dollars in thousands, 2002 2001 ----------------------------------------- ---------------------------------------- except for per share data) Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ----------------------------------------- ---------------------------------------- Net income $ 15,326 $ 18,894 ============ ============= Basic EPS Income available to common stockholders $ 15,326 25,900 $ 0.59 $ 18,894 27,905 $ 0.68 ========= ========== Effect of Dilutive Securities Stock options - 484 - 732 ------------ ------------ ------------- ----------- Diluted EPS Income available to common stockholders including assumed conversions $ 15,326 26,384 $ 0.58 $ 18,894 28,637 $ 0.66 ============ ============ ========= ============= =========== ==========
At March 31, 2002 and 2001, the Company's directors and employees held options to purchase 1,310,296 and 1,635,500 common shares, respectively, at prices ranging from $2.4792 to $14.75. During the three months ended March 31, 2002 and 2001, all but 13,472 and 247,722 of such options were considered in calculating diluted EPS. These options were excluded because the option exercise price was greater than the average market price of the Company's common stock during such periods. The dilutive effect of these options in future periods will depend on the average price of the Company's common stock during such periods. NOTE 7 COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) is defined as the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. For the Company, comprehensive income (loss) includes net income (loss) and the net change in foreign currency translation effects. The comprehensive income (loss) for the three months ended March 31, 2002 and 2001 was $2,331,000 and $(4,890,000), respectively. For the nine month-periods ended March 31, 2002 and 2001, comprehensive income was $10,153,000 and $7,771,000, respectively. NOTE 8 INCOME TAXES The provision for domestic and foreign income taxes for the three and nine-month periods ended March 31, 2002 was $2,448,000 and $12,928,000, respectively, representing Canadian income tax on the profits of the Company's Canadian subsidiary. For the three and nine-month periods ended March 31, 2001, the provision was $3,176,000 and $15,268,000, including Canadian income tax on the profits of the Canadian subsidiary as well as Australian income tax on the profits of the Company's former subsidiary in Australia. During fiscal year 1999, the Company reached an agreement with the Canadian tax authorities relating to the settlement of a dispute regarding the 1990 to 1993 taxation years. While the amount in dispute has been agreed and a settlement agreement has been executed, the Company has not yet been fully reassessed and, accordingly, this amount has not been paid. Management estimates the remaining payment relating to these issues to be approximately $8,500,000. 10 Late in fiscal year 2001, the Company reached an agreement with both the Canadian and United States tax authorities, settling substantially all of its remaining outstanding tax issues and recorded an additional provision of $700,000. Although agreement in principle has been reached on these issues, final statements summarizing amounts owing have not been received from either government. Because of the age of these issues and the terms of the settlements, there are complex interest computations to be made. Accordingly, it is not practical for management to determine with precision the exact liability associated with these matters. Management estimates that, at current rates of exchange, the liability to settle all outstanding tax issues, including the matter described immediately above, is in the range of $15,000,000 to $18,000,000, reflecting payments during the third quarter of approximately $7,000,000. Management further believes that it has a provision recorded sufficient to pay the estimated liability resulting from these issues; however, the amount ultimately paid could differ from management's estimate. The Company has one remaining issue in dispute with the Internal Revenue Service ("IRS") in the United States. The Company disagrees with the position of the IRS on this issue and, on the advice of legal counsel, believes it has meritorious arguments in its defense and is in the process of vigorously defending its position. It is management's determination that no additional provision need be recorded for this matter. However, should the IRS prevail in its position, the Company could potentially have an additional maximum liability of approximately $2,000,000. NOTE 9 COMMITMENTS AND CONTINGENCIES In connection with the sale of its former United Kingdom subsidiary during fiscal year 1999, the Company remains contingently liable as guarantor of certain leases of InterTAN U.K. Limited. At March 31, 2002 the remaining lease obligation assumed by the purchaser and guaranteed by the Company was approximately $17,000,000 and the average remaining life of such leases was approximately 5 years. If the purchaser were to default on the lease obligations, management believes the Company could reduce the exposure through assignment, subletting and other means. The Company has obtained an indemnity from the purchaser for an amount equal to management's best estimate of the Company's potential exposure under these guarantees. At March 31, 2002, the amount of this indemnity was approximately $7,100,000. The amount of this indemnity declines over time as the Company's risk diminishes. Apart from this matter and the issues discussed in Notes 3 and 8, there are no material pending proceedings or claims, other than routine matters incidental to the Company's business, to which the Company or any of its subsidiaries is a party, or to which any of its property is subject. NOTE 10 BATTERY PLUS ACQUISITION In April 2002, the Company completed the acquisition of selected assets of Battery Plus, a retailer of batteries and specialty consumer electronic products, including 43 retail locations. The costs of the assets acquired was approximately $3,000,000, which included inventory valued at approximately $1,800,000. This acquisition is not expected to have a material effect on the Company's financial position, results of operations or cash flows. NOTE 11 SEGMENT REPORTING The Company was traditionally managed along geographic lines, with its Corporate Headquarters also treated as a separate business unit. Following the sale of the Company's former subsidiary in Australia during the fourth quarter of fiscal year 2001, the Company undertook a restructuring program to streamline its operations and integrate its former Corporate Headquarters with its Canadian subsidiary. Accordingly, the Company now has only one business segment, referred to herein as "Canada", the "Canadian subsidiary" or "RadioShack 11 Canada". Transactions between segments during prior periods were not common and were not material to the segment information. The table below summarizes net sales and operating revenues, operating income (loss) and identifiable assets for the Company's segments. Consolidated operating income is reconciled to the Company's income before income tax: Net Sales and Operating Revenues and Operating Income by Segment (U.S. dollars in thousands)
Three months ended Nine months ended March 31 March 31 2002 2001 2002 2001 - ----------------------------------------------------------------------------------------------------------------------- Net sales and operating revenues Canada $ 82,678 $ 81,154 $ 308,874 $ 306,959 Australia - 22,372 - 80,568 - ----------------------------------------------------------------------------------------------------------------------- $ 82,678 $ 103,526 $ 308,874 $ 387,527 - ----------------------------------------------------------------------------------------------------------------------- Operating income (loss) Canada $ 4,929 /1/ $ 7,832 $ 26,993 /1/ $ 36,200 Australia - (339) - 1,569 - ----------------------------------------------------------------------------------------------------------------------- 4,929 7,493 26,993 37,769 Corperate Headquarters' expenses - /1/ (1,104) - /1/ (3,525) - ------------------------------------------------------------------------------------------------------- -------------- Operating income 4,929 6,389 26,993 34,244 Foreign currency transaction gains (losses) (33) (16) 262 (268) Interest income 266 288 1,301 917 Interest expense (102) (80) (302) (731) - ----------------------------------------------------------------------------------------------------------------------- Net income before income taxes $ 5,060 $ 6,581 $ 28,254 $ 34,162 - -----------------------------------------------------------------------------------------------------------------------
/1/ During fiscal year 2002, the Company's former Corporate Headquarters unit was integrated with its Canadian subsidiary.
Identifiable Assets by Segement (U.S. dollars in thousands) March 31 June 30 March 31 2002 2001 2001 - ------------------------------------------------------------------------------------------------------ Canada $ 163,010 /1/ $ 163,016 $ 147,521 Australia - - 37,639 Corporate Headquarters - /1/ 52,514 4,391 - ------------------------------------------------------------------------------------------------------ $ 163,010 $ 215,530 $ 189,551 - ------------------------------------------------------------------------------------------------------
/1/ During fiscal year 2002, the Company's former Corporate Headquarters unit was integrated with its Canadian subsidiary. 12 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- InterTAN is engaged in the sale of consumer electronics products primarily through company-operated retail stores and dealer outlets in Canada. The Company's retail operations are conducted through a wholly-owned subsidiary, InterTAN Canada Ltd., which operates under the trade name "RadioShack". The Company's Corporate Headquarters was integrated with the operations of its Canadian subsidiary during the second quarter of fiscal year 2002. During fiscal year 2001, the Company also had retail and dealer outlets in Australia. Operations in Australia were carried out through a wholly-owned subsidiary, InterTAN Australia Ltd., which conducted business under the trade name "Tandy". The Company's Australian subsidiary was sold effective April 2001. The "RadioShack" and "Tandy" trade names are used under license from RadioShack Corporation ("RadioShack U.S.A."). In addition, the Company has entered into an agreement in Canada with Rogers Wireless Inc. ("Rogers") to operate telecommunications stores ("Rogers AT&T" stores) on its behalf. At March 31, 2002, 61 Rogers AT&T stores were in operation. In April 2002, the Company acquired selected assets, including 43 retail locations, of Battery Plus, a retailer of batteries and specialty consumer electronics products. See Note 10 to the Company's consolidated financial statements. OVERVIEW There were a number of special factors and charges in the first nine months of fiscal years 2002 and 2001 that significantly impacted the Company's results of operations and affected the comparability of reported results for both the three and nine-month periods ended March 31, 2002. As previously discussed, effective April 30, 2001, the Company sold its subsidiary in Australia. The consolidated balance sheet as at March 31, 2001 and the consolidated statements of operations and cash flows for the three and nine months then ended include the results of the Australian subsidiary. During the first quarter of fiscal year 2002, the Company recorded a restructuring charge of $3,213,000. See "Restructuring Charge". Management estimates that the tax provision for the quarter was reduced by approximately $1,030,000 as a result of the deductibility for tax purposes of a portion of the restructuring costs. The tables below reflect the Company's sales, operating income, net income, and net income per share for the three and nine-month periods ended March 31, 2002 and 2001, adjusted to eliminate the following: sales and results of InterTAN Australia Ltd. for the three and nine-month periods ended March 31, 2001; the restructuring charge during the nine-month period ended March 31, 2002; and the effect of the restructuring charge on the tax provision for the nine-month period ended March 31, 2002.
Three months ended Nine months ended --------------------------------- ---------------------------------- (U.S. dollars in thousands, except March 31 March 31 per share amounts) 2002 2001 2002 2001 --------------------------------- ---------------------------------- Sales and other operating revenues $ 82,678 $ 103,526 $ 308,874 $ 387,527 Sales of Australian subsidiary - (22,372) - (80,568) ---------------- ---------------- ---------------- ----------------- Canadian sales in U.S. dollars $ 82,678 $ 81,154 $ 308,874 $ 306,959 ================ ================ ================ ================= Canadian sales in Canadian dollars $ 131,793 $ 124,023 $ 486,259 $ 464,448 ================ ================ ==================================
13
Three months ended Nine months ended --------------------------------- ---------------------------------- (U.S. dollars in thousands, except March 31 March 31 per share amounts) 2002 2001 2002 2001 --------------------------------- ---------------------------------- Operating income $ 4,929 $ 6,389 $ 26,993 $ 34,244 Adjustments (Income)loss of Australian subsidiary - 339 - (1,569) Restructuring charge - - 3,213 - ---------------- ---------------- ---------------- ----------------- Comparable operating income $ 4,929 $ 6,728 $ 30,206 $ 32,675 ================ ================ ================ ================= Net income $ 2,612 $ 3,405 $ 15,326 $ 18,894 Adjustments (Income) loss of Australian subsidiary - 228 - (1,040) Restructuring charge - - 3,213 Effect of restructuring charge on income taxes - - (1,030) - --------------- ---------------- ---------------- ---------------- Comparable net income $ 2,612 $ 3,633 $ 17,509 $ 17,854 =============== ================ ================ ================ Diluted earnings per share $ 0.11 $ 0.12 $ 0.58 $ 0.66 =============== ================ ================ ================ Comparable diluted earnings per share $ 0.11 $ 0.13 $ 0.66 $ 0.62 =============== ================ ================ ================
RESTRUCTURING CHARGE During the first quarter of fiscal year 2002, the Company recorded a restructuring charge of $3,213,000. Approximately $500,000 of this charge related to the write-off of costs incurred in connection with the study of various alternatives to enhance shareholder value. This study began during fiscal year 2001 and was concluded during the first quarter of fiscal year 2002. The remainder represented the cost of restructuring the Company's Board of Directors and streamlining the Company's Corporate Office and integrating it with InterTAN's operating subsidiary, InterTAN Canada Ltd. Management estimates that as a result of this action, selling, general and administrative expenses will be reduced on an annualized basis by approximately $1,300,000. The full benefits of the plan were experienced for the first time during the third quarter of fiscal year 2002. The following is a summary of activity within this reserve during fiscal year 2002:
Balance Balance June 30 Provision March 31 (U.S. dollars in thousands) 2001 Recorded Paid 2001 - ----------------------------------------------------------------------------------------------------------------------- Professional fees and related expenses $ - $ 510 $ 510 $ - Retirement, severance and other compensation costs - 2,659 860 1,799 Other charges - 44 44 - - ----------------------------------------------------------------------------------------------------------------------- $ - $ 3,213 $ 1,414 $ 1,799 - -----------------------------------------------------------------------------------------------------------------------
14 In April 2002, the Company announced a further restructuring of its senior management team to streamline the decision making process and optimize responsiveness. In connection with this reorganization, the Company will record a restructuring charge of less than $0.01 per diluted share during the fourth quarter of fiscal year 2002. FOREIGN EXCHANGE EFFECTS Profit and loss accounts, including sales, are translated from local currency values to U.S. dollars at monthly average exchange rates. During the third quarter of fiscal year 2002, the U.S. dollar was 4.1% stronger against the Canadian dollar relative to the comparable value during the third quarter of the prior year. As a result, the same local currency amounts in Canada translated into fewer U.S. dollars as compared with the prior year. For example, if local currency sales in Canada in the third quarter of fiscal year 2002 were the same as those in the second quarter of the prior year, the fiscal year 2002 income statement would reflect a 4.1% decrease in sales when reported in U.S. dollars. For the nine months ended March 31, 2002, the U.S. dollar was 3.9% stronger against the Canadian dollar than during the comparable period last year. SALES OUTLETS The Company's sales outlets by type and geographic region is summarized in the following table:
June 30 Mar. 31 Mar. 31 2001 Opened Closed 2002 2001 - ----------------------------------------------------------------------------------------------------------------------- Canada Company-operated 473 15 2 486 470 Rogers AT&T 55 6 - 61 53 Dealer 360 12 4 368 360 - ----------------------------------------------------------------------------------------------------------------------- 888 33 6 915 883 - ----------------------------------------------------------------------------------------------------------------------- Australia Company-operated - - - - 223 Dealer - - - - 105 - ----------------------------------------------------------------------------------------------------------------------- - - - - 328 - ----------------------------------------------------------------------------------------------------------------------- Total Company-operated 473 15 2 486 693 Rogers AT&T 55 6 - 61 53 Dealer 360 12 4 368 465 - ----------------------------------------------------------------------------------------------------------------------- 888 33 6 915 1,211 - -----------------------------------------------------------------------------------------------------------------------
NET SALES AND OPERATING REVENUES Net sales at RadioShack Canada for the third quarter in U.S. dollars were $82,678,000. In local currency, this represented an increase over the prior year quarter of 6%. Measured on the same basis, comparable stores increased by 3%. The sales comparison, measured in U.S. dollars, was adversely affected by a decline in the value of the Canadian dollar of 4.1% compared with the same period last year. Taking this decline into consideration, sales in U.S. dollars for the third quarter of fiscal year 2002 increased by 2% over the same quarter last year. 15 During the quarter, consumers continued to demonstrate a preference towards a more digital-focused product base. While sales of DVD players, camcorders and still digital cameras all showed strong double-digit growth, this trend was most evident in sales of digital accessories and software. Consumers are also moving quickly to adopt new GSM/GPRS technology, which is contributing to sales of subscriber-based wireless technology. The Company's decision to introduce Playstation products into its stores was well accepted by consumers. From a zero base a year ago, video games sales now represent almost 3% of total revenues. Sales of traditional accessories contributed small but positive single-digit gains. While the digital trend continues to produce good results in these categories, these sales gains come at the expense of older analog technologies such as traditional landline telephones, toys and tape recorders. There were two factors that had a significant negative impact on sales for the quarter: O The March quarter of fiscal year 2001 marked the conclusion of a government sponsored program to subsidize the purchase of computers by families in the province of Quebec. This program produced a sales performance in the computer hardware category last year that proved impossible to match. While hardware sales were strong in central and western Canada, they were down significantly in eastern Canada. Overall, computer hardware sales for the quarter were 20% lower than last year. Had hardware sales been merely flat with the prior year, the overall sales gain for the quarter would have been 50% higher than that actually reported. O The Canadian direct to home satellite business has been significantly impacted in recent months by the effects of gray marketers. This practice involves importing U.S. Direct TV systems and, in some cases, inserting Direct TV cards into one of the licensed Canadian provider's systems. These pirated systems are attractive to certain consumers because they offer programing that is not otherwise available in Canada. The grey marketers also offer a rate structure that is significantly lower than regular Canadian rates because the gray marketer pays nothing for programing. The Company continues to be the leading retailer of legitimate Canadian satellite dishes. However, the action of these gray marketers has had a significant impact on the Company's performance in this category. While there was positive growth in Company stores, the rate of growth was below the rate of growth traditionally experienced. In the dealer division, however, which typically accounts for over 40% of total satellite sales, sales were off 35% from the comparable quarter last year. While it is the position of the Canadian satellite industry, the federal government and the Company that this practice constitutes piracy and is illegal, the gray marketers had received some support from a Canadian court which ruled that it lacked the jurisdiction to prevent these practices. In April 2002, the Supreme Court of Canada ruled that the action of the gray marketers was illegal, overturning the decision of the lower court. In announcing its decision, however, the Court also stated that it expressed no opinion on whether the legislation that banned the distribution of these U.S. based signals in Canada was in violation of the freedom of communication section of Canada's Charter of Rights. Subject to a final resolution of this matter, the federal government has indicated that it will act quickly to stop the illegal distribution of U.S. based signals into Canada. The company believes its satellite strategy is still sound and that normal growth will return once the illegal practices of the gray marketers are put to an end. The rate of growth may even accelerate because consumers who had purchased systems from the gray market would, in many cases, over a period of time, no longer have service. Such loss of service would occur because countermeasures maintained by certain satellite carriers change security codes from time to time, thus rendering certain gray market and counterfeit programming cards useless. However, until this matter is finally resolved, sales and margins could continue to be to be negatively impacted. 16 In April 2002, the Company acquired selected assets of Battery Plus, a retailer of batteries and specialty consumer electronics products, including 43 retail locations. While there may be some disruption in the near term while this business is integrated with RadioShack Canada, management estimates that the Battery Plus acquisition will result in an increase in sales during the fourth quarter of one to two percent. GROSS PROFIT While consolidated gross profit dollars for the quarter declined, this reduction in gross profit dollars was primarily attributable to the sale of the Company's Australian subsidiary. Were it not for the effects of a weaker Canadian dollar, gross profit dollars at RadioShack Canada for the quarter would have been flat with the prior year, as the impact of a lower gross margin percentage was fully offset by additional gross profit dollars generated by higher sales. The following analysis summarizes the components of the change in gross profit dollars for the third quarter from the comparable prior year period:
(U.S. dollars in thousands) Increase in sales $ 2,068 Decrease in gross margin percentage (2,075) Foreign currency effects (713) -------------- (720) Disposal of Australian subsidiary (9,144) -------------- Change in gross profit dollars $ (9,864) ==============
The gross margin percentage in the Canadian subsidiary for the third quarter was 39.9%, a decline of 170 basis points. Approximately 25% of this decline was attributable to the effects of a one-time rebate adjustment received from one of the Company's vendors during the third quarter last year. Although the sales that generated this rebate had taken place during the second quarter, the rebate was not agreed with the vendor until the third quarter and, accordingly, could not be recognized until that period. The disruption in the satellite business caused by the gray marketing activities described earlier also had a negative impact on the gross margin percentage, as the gross margin percentage generated by satellite sales of each of the Company's suppliers are well above the Company's average margins. While the favorable Supreme Court decision should help the Company's satellite sales, management believes there still could be some pressure on margins, at least in the near term, until the applicability of Canada's Charter of Rights is resolved. In addition, the Company continues to offer a significantly enhanced range of digital accessories and end products, as consumers' preferences continue to shift towards these products relative to more traditional analog technologies. While many of these products carry less than the Company's traditional margins, which reduces the gross margin percentage, management believes that the strategic shift in product preferences will continue and the Company will continue to position the Company for profitable sales growth in response to these changes in demand. Extensive promotional activity designed to support sales due to the satellite situation and robust computer sales in Quebec during the prior year quarter resulted in further erosion in the margin percentage. Sales declines during the quarter in more conventional landline telephones, personal electronics and toys also put pressure on margins. The gross margin percentage continues to benefit from the Company's strong performance in subscriber-based services and attendant increases in after the sale compensation in the form of residuals and sales-based volume rebates. For the quarter, after the sale compensation was $1,729,000 about 2% of total 17 revenue. When the effects of the rebate adjustment described above are eliminated from the prior year's base, this represented an increase of approximately 30% over the same quarter last year. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES The following table provides a breakdown of selling, general and administrative expense ("SG&A") by major category:
Three months ended March 31 Nine months ended March 31 2002 2001 2002 2001 (U.S. dollars in thousands, Dollars % of Sales Dollars % of Sales Dollars % of Sales Dollars % of Sales except percents) - --------------------------------------------------------------------------------------------------------------------------------- Canadian and Corporate expenses Payroll $ 11,693 14.1 $ 11,606 14.3 $ 38,746 12.5 $ 37,564 12.2 /1/ Advertising 2,279 2.8 1,971 2.4 9,225 3.0 11,604 3.8 /1/ Rent 4,345 5.3 4,242 5.2 13,838 4.5 13,304 4.3 /1/ Taxes (other than income tax) 2,288 2.8 2,114 2.6 6,505 2.1 5,873 1.9 /1/ Telephone and utlities 943 1.1 880 1.1 2,614 0.8 2,481 0.8 /1/ Other 5,152 6.2 4,922 6.1 16,173 5.2 15,340 5.1 /1/ - --------------------------------------------------------------------------------------------------------------------------------- 26,700 32.3 25,735 31.7 87,101 28.2 86,166 28.1 /1/ Australian expenses - - 9,113 40.7 - 29,597 36.7 /2/ - --------------------------------------------------------------------------------------------------------------------------------- Consolidated expenses $ 26,700 32.3 $ 34,848 33.7 $ 87,101 28.2 $ 115,763 29.9 /3/ - ---------------------------------------------------------------------------------------------------------------------------------
/1/ Percentages are of Canadian sales. /2/ Percentage is of Australian sales. /3/ Percentage is of consolidated sales. As previously indicated, following the sale of the Australian subsidiary during the fourth quarter of fiscal year 2001, the Company streamlined its remaining operations and integrated its former Corporate headquarters with those of its Canadian subsidiary. See "Overview". To make comparisons more meaningful, in the following discussion, the selling, general and administrative expenses of the Company's former Corporate Headquarters for the prior year period have been aggregated with those of RadioShack Canada. SG&A expenses at RadioShack Canada and the Company's former Corporate Headquarters in U.S. dollars increased by $965,000 over the comparable quarter last year. This comparison was influenced by the effects of a weaker Canadian dollar. Measured at the same exchange rates, SG&A expense increased by approximately 8%. The following is a breakdown of the same-exchange-rate increase (decrease) in SG&A expense in Canada and Corporate Headquarters over the same quarter in the prior year: 18 Percentage increase (decrease)
Three months ended Nine months ended March 31, 2002 March 31, 2002 --------------------------- ----------------------------- Payroll 5.1 (17.3) Advertising 21.7 8.2 Rents 6.9 7.3 Taxes (other than income taxes) 19.7 21.0 Telephone and utilities 11.7 9.6 Other 6.1 7.3 - -------------------------------------------------------------------------------------------------------------------- Total increase 8.2 5.1 - --------------------------------------------------------------------------------------------------------------------
Payroll and rent both increased, primarily as a result of an increase in the number of Company operated retail locations. The Company is currently planning about 20 new company-operated stores during fiscal year 2002 and 15 of those stores were open by the end of the third quarter. The Company increased its advertising efforts as part of its promotional activities designed to drive sales. This activity was necessary to combat the effects of the Quebec computer program in the comparative quarter and disappointing satellite sales this year. Taxes (other than income taxes), primarily represents business taxes on the Company's stores and head office and warehouse locations. The increase in this expense category was a result of the combination of tax rate increases, new stores and increases in the size of existing stores. The effects of all of these increases were partially offset by the effects of the management restructuring announced during the second quarter. While selling, general and administrative expenses were well within plan, sales fell short of expectations. Consequently, the selling, general and administrative expenditure percentage for the quarter increased to 32.3%, up 60 basis points over the prior year. FOREIGN CURRENCY TRANSACTION LOSSES Foreign currency transaction losses were $33,000 during the third quarter of fiscal year 2002 compared with losses of $16,000 for the comparable quarter last year. INTEREST INCOME AND EXPENSE Interest income for the quarter was $266,000 compared with $288,000 a year ago. Interest income was lower than during the first two quarters of fiscal year 2002, as a substantial portion of the Company's cash resources, including the proceeds on the sale of its Australian subsidiary, have been used to fund the purchase of common stock. Additional cash will also be needed to fund the payment of income tax assessments and the Battery Plus acquisition. See "Income Taxes Payable" and Note 10 to the Company's consolidated financial statements. Accordingly, interest income will likely be lower in future periods. Interest expense for the quarter was $102,000 compared with $80,000 in the prior-year quarter. In both periods, interest expense consisted entirely of commitment fees and loan amortization charges, as there were no borrowings during either quarter. 19 PROVISION FOR INCOME TAXES The provision for income taxes for the quarter was $2,448,000, and consisted entirely of Canadian taxes on the profits of RadioShack Canada. The effective rate for the quarter was 48.4%. Last year, the provision for tax was $3,176,000. The effective tax rate a year ago was 48.3%. FINANCIAL CONDITION - ------------------- Most balance sheet accounts are translated from their values in local currency to U.S. dollars at the respective month end rates. The table below outlines the percentage change, to March 31, 2002, in the value of the Canadian dollar as measured against the U.S. dollar: - ------------------------------------------------------------------------------- Percentage decrease from March 31, 2001 1.2% Percentage decrease from June 30, 2001 5.1% - ------------------------------------------------------------------------------- INVENTORIES Inventories at March 31, 2002 were $82,497,000, down from $105,894,000 a year ago and $90,394,000 at June 30, 2001. The sale of the Australian subsidiary more than accounts for the reduction from March 31, 2001. At RadioShack Canada, inventories have increased by about 3% in local currency, despite a 6% increase in the number of inventoried stores and increases in the product range. This strong performance is attributable to significant improvements in inventory management resulting from the Company's investment in people involved in sales support functions and from the benefits of the Company's micro merchandising program. The Company is now sourcing locally-purchased inventory more frequently, and purchasing in smaller quantities. This strategy will reflect positively on both cash flow requirements and the risk of obsolescence. The benefits of the new inventory strategy are also evident in the comparison with inventory levels at June 30, 2001. Despite the increase in the number of inventoried storefronts described above and the introduction of over 500 new SKUs, inventories at RadioShack Canada at March 31, 2002 were down, in local currency, almost 4% from June 30, 2001 levels. ACCOUNTS PAYABLE Accounts payable were $13,227,000 at March 31, 2002 compared to $19,951,000 at March 31, 2001 and $20,034,000 at June 30, 2001. The reduction from March 31, 2001 is explained primarily by the sale of the Australian subsidiary. The decrease from June 30, 2001 is due to the Company taking advantage of early payment discounts. In addition, payment of certain suppliers at June 30, 2001, had been delayed while account balances were reconciled. INCOME TAXES PAYABLE Income taxes payable were $15,600,000 at March 31, 2002 compared with $24,592,000 at March 31, 2001 and $24,913,000 at June 30, 2001. Both of these reductions are a result of timing differences and the payment of reassessments discussed below. During fiscal year 1999, the Company reached an agreement with the Canadian tax authorities relating to the settlement of a dispute regarding the 1990 to 1993 taxation years. While the amount in dispute has been agreed 20 and a settlement agreement has been executed, the Company has not yet been fully reassessed and, accordingly, this amount has not been paid. Management estimates the remaining payment relating to these issues to be approximately $8,500,000. Late in fiscal year 2001, the Company reached an agreement with both the Canadian and United States tax authorities, settling substantially all of its remaining outstanding tax issues and recorded an additional provision of $700,000. Although agreement in principle has been reached on these issues, final statements summarizing amounts owing have not been received from either government. Because of the age of these issues and the terms of the settlements, there are complex interest computations to be made. Accordingly, it is not practical for management to determine with precision the exact liability associated with these matters. Management estimates that, at current rates of exchange, the liability to settle all outstanding tax issues, including the matter described immediately above, is in the range of $15,000,000 to $18,000,000, reflecting payments during the third quarter of approximately $7,000,000. The Company anticipates that payment of a substantial portion of the remaining balance will be required during the fourth quarter of the current fiscal year. Management further believes that it has a provision recorded sufficient to pay the estimated liability resulting from these issues; however, the amount ultimately paid could differ from management's estimate. The Company has one remaining issue in dispute with the Internal Revenue Service ("IRS") in the United States. The Company disagrees with the position of the IRS on this issue and, on the advice of legal counsel, believes it has meritorious arguments in its defense and is in the process of vigorously defending its position. It is management's determination that no additional provision need be recorded for this matter. However, should the IRS prevail in its position, the Company could potentially have an additional maximum liability $2,000,000. OTHER LIABILITIES Other liabilities were $2,400,000 at March 31, 2002 compared with $5,038,000 at March 31, 2002 and $2,518,000 at June 30, 2001. The reduction in the level of other liabilities from March 31, 2002 relates to the disposal of the Australian subsidiary. Foreign currency effects explain the reduction from June 30, 2001. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash flows from operating activities during the nine-month period ended March 31, 2002 generated $10,219,000 in cash compared with $19,615,000 in cash during the comparable period last year. This reduction was due primarily to changes in working capital requirements, in particular as a result of the payment of tax reassessments relating to prior years of approximately $7,000,000. See "Income Taxes Payable". A reduction in net income, partially attributable to the effects of the disposal of the Company's former Australian subsidiary last year as well as the restructuring charge recorded during the first quarter of the current fiscal year, was also a contributing factor. Cash flow from investing activities consumed $8,150,000 and $9,305,000 in cash during the nine-month periods ended March 31, 2002, and 2001 respectively, as the effects of routine additions to property and equipment were partially offset by the proceeds from the sale of property and equipment and from other investing activities. The reduction is more than attributable to the effects of the disposal of the Australian subsidiary, as capital spending at RadioShack Canada increased modestly. During the nine-month period ended March 31, 2002, cash flow from financing activities consumed $49,970,000 in cash. During the first nine months of fiscal year 2002, the Company completed two separate stock repurchase programs. Under these two programs, an aggregate of 5,400,000 shares were purchased at a total cost of $53,567,000. This cash outflow was partially offset by proceeds from the issuance of common 21 stock to employee plans and from the exercise of stock options. During the nine-month period ended March 31, 2001, cash flow from financing activities consumed $13,515,000 in cash. In April 2000, the Company announced that the Board of Directors had authorized a program for the repurchase of up to 1,500,000 common shares. By June 30, 2000, 285,200 shares had been acquired under this program. During the first quarter of fiscal year 2001, the remaining 1,214,800 shares were acquired at an aggregate cost of $15,529,000. This cash outflow was partially offset by proceeds from the issuance of stock to employee plans and from the exercise of stock options. On May 4, 2001, InterTAN Canada Ltd. and InterTAN, Inc. extended its revolving credit facility (the "Revolving Loan Agreement") in an amount not to exceed C$75,000,000 (approximately $47,000,000 at March 31, 2002 exchange rates). The Revolving Loan Agreement matures March 22, 2003. The amount of credit actually available at any particular time is dependent on a variety of factors, including the level of eligible inventories and accounts receivable of InterTAN Canada Ltd. The amount of available credit is then reduced by the amount of trade accounts payable then outstanding as well as certain other reserves. A loan origination fee of C$37,500 (approximately $23,500 at March 31, 2002 exchange rates) was payable on closing. A further payment of C$37,500 was required on March 22, 2002. Borrowing rates under the facility range from prime to prime plus 0.75%, based on the Company's quarterly performance against predetermined EBITDA to fixed charge ratios. Using the same criteria, the Company may borrow at bankers' acceptance and LIBOR rates plus from 0.75% to 2.0%. Letters of credit are charged at rates ranging from 0.75% per annum to 2.0% per annum, using the same performance criteria. In addition, a standby fee of 0.65% is payable on the unused portion of the credit facility. The Revolving Loan Agreement is collateralized by a first priority lien over all of the assets of InterTAN Canada Ltd. and is guaranteed by InterTAN, Inc. This facility will be used primarily to finance seasonal inventory build up and, from time to time, to provide letters of credit in support of purchase orders. At March 31, 2002, there were no borrowings against the Revolving Loan Agreement, and approximately $9,000 was committed in support of letters of credit. There was approximately C$42,587,000 (approximately $26,689,000 at March 31, 2002 exchange rates) of credit available for use at March 31, 2002 under this facility. Under the terms of the Company's Merchandise Agreement with RadioShack U.S.A., purchase orders with Far Eastern suppliers must be supported, based on a formula set out in the Merchandise Agreement, by letters of credit issued by banks on behalf of InterTAN, by a surety bond, or backed by cash deposits. The Company has secured surety bond coverage from a major insurer (the "Bond") in an amount not to exceed $12,000,000. Use of the Bond gives the Company greater flexibility in placing orders with Far Eastern suppliers by releasing a portion of the credit available under the Revolving Loan Agreement for other purposes. The Company's primary uses of liquidity during the remainder of fiscal year 2002 will include the funding of capital expenditures, payments in settlement of tax issues, the purchase of Battery Plus and the recently announced fifth common stock repurchase program. Management estimates that capital expenditures in Canada during the remainder of fiscal 2002 will approximate $7,000,000. These expenditures relate primarily to investments in store assets, including new stores, renovating and relocating existing stores and store fixtures and equipment, improvements to the Company's distribution center and enhancements to management information systems. Late in fiscal year 2001, the Company reached agreements with both the Canadian and United States tax authorities, settling certain outstanding tax issues. See "Income Taxes Payable". Management estimates that during the fourth quarter of fiscal year 2002, payments flowing from these settlements, together with other matters previously agreed, will be approximately $15,000,000 to $18,000,000. In April 2002, the company completed the acquisition of selected assets of Battery Plus. The cost of closing this transaction was approximately $3,000,000. In May 2002, the Company's Board of Directors announced a fifth share repurchase program under which management is authorized, subject to market conditions, to purchase up to an additional 1,200,000 shares, approximately 5% of the shares then outstanding. Management estimates that this program will require $13,000,000 to $16,000,000 in cash during the fourth quarter of fiscal year 2002 and the first quarter of fiscal year 2003. 22 Management believes that the Company's cash and short-term investments on hand and its cash flow from operations combined with its banking facilities and the Bond will provide the Company with sufficient liquidity to meet its planned requirements through the scheduled expiry of its current banking agreement. The Company is currently in the process of developing its strategic plan for fiscal year 2003. An analysis of cash flow requirements and the Company's financing requirements in the near and long term and will be part of that process. The Company's banking requirements will be re-evaluated in light of the results of that study. 23 PART II - OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS The various matters discussed in Notes 3, and 8 to the Company's Consolidated Financial Statements on pages 7 and 10 of this Form 10-Q are incorporated herein by reference. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's stockholders during the three-month period ended March 31, 2002. ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits Required by Item 601 of Regulation S-K:
Exhibit No. Description 3(a) Restated Certificate of Incorporation (Filed as Exhibit 3(a) to InterTAN's Registration Statement on Form 10 and incorporated herein by reference). 3(a)(i) Certificate of Amendment of Restated Certificate of Incorporation (Filed as Exhibit 3(a)(i) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1995 and incorporated herein by reference). 3(a)(ii) Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock (Filed as Exhibit 3(a)(i) to InterTAN's Registration Statement on Form 10 and incorporated herein by reference). 3(b) Bylaws (Filed on Exhibit 3(b) to InterTAN's Registration Statement on Form 10 and incorporated herein by reference). 3(b)(i) Amendments to Bylaws through August 3, 1990 Filed as Exhibit 3(b)(i) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1990 and incorporated herein by reference). 3(b)(ii) Amendments to Bylaws through May 15, 1995 (Filed as Exhibit 3(b)(ii) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1995 and incorporated herein by reference).
24 3(b)(iii) Amended and Restated Bylaws (filed as Exhibit 3(b)(iii) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1996 and incorporated herein by reference). 4(a) Articles Fifth and Tenth of the Restated Certificate of Incorporation (included in Exhibit 3(a)). 4(b) Rights Agreement between InterTAN, Inc. and Bank Boston, NA (filed as Exhibit 4 to the company's Form 8-A filed on September 17, 1999 and incorporated herein by reference) (*) 10(a) Indemnification Agreement between InterTAN, Inc. and James P. Maddox dated as of February 21, 2002. (*) 10(b) Indemnification Agreement between InterTAN, Inc. and Heinz Stier dated as of February 21, 2002. (*) 10(c) Employment Agreement between InterTAN, Inc. and Michael D. Flink dated March 21, 2002.
- ------------------------- (*) Filed herewith b) Reports on Form 8-K: No Reports on form 8K were filed during the three-month period ended March 31, 2002 25 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. InterTAN, Inc. (Registrant) Date: May 14, 2002 By: /s/ James P. Maddox ------------------- James P. Maddox Vice-President and Chief Financial Officer (Chief Financial Officer) By: /s/ Brian E. Levy -------------------- Brian E. Levy President and Chief Executive Officer (Authorized Officer) 26 InterTAN, Inc. Form 10Q - Period Ended March 31, 2002 Index to Exhibits Exhibit No. Description 3(a) Restated Certificate of Incorporation (Filed as Exhibit 3(a) to InterTAN's Registration Statement on Form 10 and incorporated herein by reference). 3(a)(i) Certificate of Amendment of Restated Certificate of Incorporation (Filed as Exhibit 3(a)(i) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1995 and incorporated herein by reference). 3(a)(ii) Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock (Filed as Exhibit 3(a)(i) to InterTAN's Registration Statement on Form 10 and incorporated herein by reference). 3(b) Bylaws (Filed on Exhibit 3(b) to InterTAN's Registration Statement on Form 10 and incorporated herein by reference). 3(b)(i) Amendments to Bylaws through August 3, 1990 (Filed as Exhibit 3(b)(i) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1990 and incorporated herein by reference). 3(b)(ii) Amendments to Bylaws through May 15, 1995 (Filed as Exhibit 3(b)(ii) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1995 and incorporated herein by reference). 3(b)(iii) Amended and Restated Bylaws (filed as Exhibit 3(b)(iii) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1996 and incorporated herein by reference). 4(a) Articles Fifth and Tenth of the Restated Certificate of Incorporation (included in Exhibit 3(a)). 4(b) Rights Agreement between InterTAN, Inc. and Bank Boston, NA (filed as Exhibit 4 to the company's Form 8-A filed on September 17, 1999 and incorporated herein by reference) (*) 10(a) Indemnification Agreement between InterTAN, Inc. and James P. Maddox dated as of February 21, 2002. (*) 10(b) Indemnification Agreement between InterTAN, Inc. and Heinz Stier dated as of February 21, 2002. (*) 10(c) Employment Agreement between InterTAN, Inc. and Michael D. Flink dated March 21, 2002. - ------------------------------- (*) Filed herewith EX-10.A 3 dex10a.txt INDEMNIFICATION AGREEMENT B/W INTERTAN & MADDOX Exhibit 10 (a) INDEMNIFICATION AGREEMENT THIS AGREEMENT is made and entered into as of the 21st day of February, 2002 ("Agreement"), by and between InterTAN, Inc., a Delaware corporation ("Company"), and James P. Maddox ("Indemnitee"). RECITALS: WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors or officers in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to, and activities on behalf of, the corporation; this is because such persons in service to corporations are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the corporation or business enterprise itself; and WHEREAS, the Board of Directors of the Company (the "Board") has determined that, to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities; and WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company's stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future; and WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefore, nor to diminish or abrogate any rights of Indemnitee thereunder; and WHEREAS, each of Section 145 of the General Corporation Law of the State of Delaware ("DGCL") and the Bylaws is nonexclusive, and therefore contemplates that contracts may be entered into with respect to indemnification of directors, officers and employees; and WHEREAS, Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified; NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee hereby covenant and agree as follows: Section 1. Services by Indemnitee. Indemnitee agrees to continue to serve as a director or officer of the Company. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries) and Indemnitee. This Agreement shall continue in force after Indemnitee has ceased to serve as a director or officer of the Company. Section 2. Indemnification - General. The Company shall indemnify, and advance Expenses (as hereinafter defined) to, Indemnitee (a) as provided in this Agreement and (b) to the fullest extent permitted by applicable law in effect on the date hereof and as amended from time to time. The rights of Indemnitee provided under the preceding sentence shall include, but shall not be limited to, the rights set forth in the other Sections of this Agreement. Section 3. Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be indemnified under this Section 3 if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to or a participant in any threatened, pending, or completed Proceeding (as hereinafter defined), other than a Proceeding by or in the right of the Company. Pursuant to this Section 3, Indemnitee shall be indemnified against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if he acted in Good Faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful. Section 4. Proceedings by or in the Right of the Company. Indemnitee shall be indemnified under this Section 4 if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or a participant in any threatened, pending or completed Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding if he acted in Good Faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company; provided that if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware, or the court in which such Proceeding shall have been brought or is pending, shall determine that such indemnification may be made. Section 5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding (including dismissal without prejudice), he shall be indemnified to the maximum extent permitted by law against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters -2- in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. Section 6. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith; provided that he shall not be paid for time spent as such. Section 7. Advancement of Expenses. Notwithstanding any provision of this Agreement to the contrary, the Company shall advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding in which Indemnitee is involved by reason of Indemnitee's Corporate Status within 10 days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee. Indemnitee hereby undertakes to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 7 shall be unsecured and interest free. Section 8. Procedure For Determination of Entitlement to Indemnification. (a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification. (b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 8(a), a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case, unless Indemnitee and the Company agree otherwise, by Independent Counsel (as hereinafter defined) in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; and, if it is determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within 10 days after such determination. Indemnitee shall cooperate with the person, persons or firm making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or firm upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or firm making such determination shall be paid by the Company (irrespective of the determination -3- as to Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. (c) The Independent Counsel referred to in Section 8(b) shall be selected as provided in this Section 8(c). The Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. Within 10 days after such written notice of selection shall have been given, Indemnitee may deliver to the Company a written objection to such selection; provided that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 17, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 8(a), no Independent Counsel shall have been selected and not objected to, Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection that shall have been made by Indemnitee to the Company's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall then act as Independent Counsel under Section 8(b). Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 10(a), Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). (d) The Company shall not be required to obtain the consent of Indemnitee to the settlement of any Proceeding the Company has undertaken to defend if the Company assumes full and sole responsibility for such settlement and the settlement grants Indemnitee a complete and unqualified release in respect of the potential liability. The Company shall not be liable for any amount paid by the Indemnitee in settlement of any Proceeding that is not defended by the Company, unless the Company has consented to such settlement, which consent shall not be unreasonably withheld. Section 9. Presumptions; Reliance and Effect of Certain Proceedings. (a) In making a determination with respect to entitlement to indemnification hereunder, the person, persons or firm making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 8(a) and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or firm of any determination contrary to that presumption. Neither the failure of Independent Legal Counsel to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of -4- conduct, nor an actual determination thereby that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct. (b) If the person, persons or firm empowered under Section 8 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within 60 days after receipt by the Company of the request therefore, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided that such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person, persons or firm making the determination with respect to entitlement to indemnification in good faith requests in writing such additional time for the obtaining or evaluating of documentation and/or information relating thereto. (c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contend ere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in Good Faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe his conduct was unlawful. (d) For purposes of any determination of Good Faith, Indemnitee shall be deemed to have acted in Good Faith if Indemnitee's action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers, agents or employees of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser, financial advisor or other expert or professional selected with reasonable care by the Enterprise. The provisions of this Section 9(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. (e) The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Section 10. Remedies of Indemnitee. (a) If (i) a determination is made pursuant to Section 8 that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 7, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 8(b) within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5, Section 6, the -5- last sentence of Section 8(b) or the last sentence of Section 17(g) within 10 days after receipt by the Company of a written request therefore, or (v) payment of indemnification pursuant to Section 3 or Section 4 is not made within 10 days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication by the Court of Chancery of the State of Delaware of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 10(a); provided that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his rights under Section 5. The Company shall not oppose Indemnitee's right to seek any such adjudication or award in arbitration. (b) If a determination shall have been made pursuant to Section 8(b) that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 10 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. (c) If a determination shall have been made pursuant to Section 8(b) that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 10, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statements not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law. (d) If Indemnitee, pursuant to this Section 10, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all expenses (of the types described in the definition of Expenses in Section 17 of this Agreement) actually and reasonably incurred by him in such judicial adjudication or arbitration unless it shall be finally determined by the court or arbitrator before which such claim was brought that it was brought in bad faith. Even if it shall be determined in such judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be paid in full. (e) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 10 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and hereby stipulates, and shall so stipulate in any such court or before any such arbitrator, that the Company is bound by all the provisions of this Agreement. Section 11. Nonexclusivity; Insurance; Subrogation. (a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee -6- may at any time be entitled under applicable law, the Company's Certificate of Incorporation, the Company's Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company's Certificate of Incorporation, Bylaws and this Agreement, it is the agreement and intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy. (b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. (c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. (d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided hereunder) hereunder if and to the extent that Indemnitee has otherwise theretofore actually received such payment under any insurance policy, contract, agreement or otherwise. (e) The Company's obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually theretofore received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. Section 12. Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (i) 10 years after the date that Indemnitee shall have ceased to serve as a director or officer of the Company (or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that Indemnitee served at the request of the Company); or (ii) the final termination of any Proceeding then pending in respect of which Indemnitee is granted -7- rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 10 relating thereto. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his heirs, executors and administrators. Section 13. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (i) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (ii) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (iii) to the fullest extent possible, the provisions of this Agreement (including without limitation each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby. Section 14. Exception to Right of Indemnification or Advancement of Expenses. Notwithstanding any other provision of this Agreement, but subject to Section 10, Indemnitee shall not be entitled to indemnification or advancement of Expenses under this Agreement with respect to any Proceeding brought by Indemnitee, or any claim therein, unless the bringing of such Proceeding or making of such claim shall have been approved by the Board of Directors. Section 15. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. Section 16. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. Section 17. Definitions. For purposes or this Agreement: (a) "Corporate Status" describes the status of a person who is or was a director, officer, employee or agent of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving at the request of the Company. (b) "Disinterested Director" means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee. -8- (c) "Effective Date" means the date first above written. (d) "Enterprise" shall mean the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary. (e) "Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel and lodging expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. (f) "Good Faith" shall mean Indemnitee having acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal Proceeding, having had no reasonable cause to believe Indemnitee's conduct was unlawful. (g) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or any affiliate thereof or Indemnitee (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. The Company shall promptly pay the reasonable fees and expenses of the Independent Counsel referred to above and shall fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. (h) "Proceeding" includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action taken by him or of any inaction on his part while acting as director or officer of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification or advancement of expenses can be provided under this Agreement; except one initiated by a Indemnitee pursuant to Section 10 to enforce his rights under this Agreement. -9- (i) References to "other enterprise" shall include employee benefit plans; references to "fines" shall include any excise tax assessed with respect to any employee benefit plan; references to "serving at the request of the Company" shall include any service as a director, officer, employee or agent of the Company that imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, as participants or beneficiaries; and a person who acted in good faith and in the manner he reasonably believed to be in the interests of the participants and beneficiaries of an employee benefit plan shall not be deemed to have acted in manner "not opposed to the best interests of the Company" as referred to in this Agreement. (j) "Affiliate" means with respect to any person or entity, any other person or entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with, such person or entity. Section 18. Enforcement. (a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to continue to serve as a director and/or officer of the Company, and to serve upon any committee of the Board of Directors of the Company as requested by such Board, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director and/or officer of the Company and a member of any such committee. (b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof. Section 19. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. Section 20. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter that may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation it may have to the Indemnitee under this Agreement or otherwise, except to the extent the Company is materially prejudiced by such failure. Section 21. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom the notice or other communication shall have been directed, -10- or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: (a) If to Indemnitee, to: 511 Melrose Avenue Toronto, Ontario M5M 2A1 (b) If to the Company, to: InterTAN, Inc. 279 Bayview Drive Barrie, Ontario L4M 4W5 Canada Attention: Sr. Vice President, Secretary & General Counsel or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be. Section 22. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s). Section 23. Governing Law; Submission to Jurisdiction; Appointment of Agent for Service of Process. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 10(a), the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the "Delaware Court"), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to and submit to the exclusive jurisdiction of the Delaware Court for -11- purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not a resident of the State of Delaware, irrevocably CT Corporation, 1209 Orange Street, Wilmington, Delaware 19801 as its agent in the State of Delaware as such party's agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or otherwise inconvenient forum. Section 24. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. All references in this Agreement to Sections shall be deemed to be references to Sections of this Agreement unless the context indicates otherwise. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. InterTAN, Inc. By: /s/ Jeffrey A. Losch ---------------------------------------------- Jeffrey A. Losch Sr Vice President, Secretary & General Counsel /s/ James P. Maddox ---------------------------------------------- James P. Maddox -12- EX-10.B 4 dex10b.txt INDEMNIFICATION AGREEMENT B/W INTERTAN & STIER Exhibit 10(b) INDEMNIFICATION AGREEMENT THIS AGREEMENT is made and entered into as of the 21st day of February, 2002 ("Agreement"), by and between InterTAN, Inc., a Delaware corporation ("Company"), and Heinz Stier ("Indemnitee"). RECITALS: WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors or officers in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to, and activities on behalf of, the corporation; this is because such persons in service to corporations are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the corporation or business enterprise itself; and WHEREAS, the Board of Directors of the Company (the "Board") has determined that, to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities; and WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company's stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future; and WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefore, nor to diminish or abrogate any rights of Indemnitee thereunder; and WHEREAS, each of Section 145 of the General Corporation Law of the State of Delaware ("DGCL") and the Bylaws is nonexclusive, and therefore contemplates that contracts may be entered into with respect to indemnification of directors, officers and employees; and WHEREAS, Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified; NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee hereby covenant and agree as follows: Section 1. Services by Indemnitee. Indemnitee agrees to continue to serve as a director or officer of the Company. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries) and Indemnitee. This Agreement shall continue in force after Indemnitee has ceased to serve as a director or officer of the Company. Section 2. Indemnification - General. The Company shall indemnify, and advance Expenses (as hereinafter defined) to, Indemnitee (a) as provided in this Agreement and (b) to the fullest extent permitted by applicable law in effect on the date hereof and as amended from time to time. The rights of Indemnitee provided under the preceding sentence shall include, but shall not be limited to, the rights set forth in the other Sections of this Agreement. Section 3. Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be indemnified under this Section 3 if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to or a participant in any threatened, pending, or completed Proceeding (as hereinafter defined), other than a Proceeding by or in the right of the Company. Pursuant to this Section 3, Indemnitee shall be indemnified against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if he acted in Good Faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful. Section 4. Proceedings by or in the Right of the Company. Indemnitee shall be indemnified under this Section 4 if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or a participant in any threatened, pending or completed Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding if he acted in Good Faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company; provided that if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware, or the court in which such Proceeding shall have been brought or is pending, shall determine that such indemnification may be made. Section 5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding (including dismissal without prejudice), he shall be indemnified to the maximum extent permitted by law against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but -2- is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. Section 6. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith; provided that he shall not be paid for time spent as such. Section 7. Advancement of Expenses. Notwithstanding any provision of this Agreement to the contrary, the Company shall advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding in which Indemnitee is involved by reason of Indemnitee's Corporate Status within 10 days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee. Indemnitee hereby undertakes to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 7 shall be unsecured and interest free. Section 8. Procedure for Determination of Entitlement to Indemnification. (a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification. (b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 8(a), a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case, unless Indemnitee and the Company agree otherwise, by Independent Counsel (as hereinafter defined) in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; and, if it is determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within 10 days after such determination. Indemnitee shall cooperate with the person, persons or firm making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or firm upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including -3- attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or firm making such determination shall be paid by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. (c) The Independent Counsel referred to in Section 8(b) shall be selected as provided in this Section 8(c). The Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. Within 10 days after such written notice of selection shall have been given, Indemnitee may deliver to the Company a written objection to such selection; provided that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 17, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 8(a), no Independent Counsel shall have been selected and not objected to, Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection that shall have been made by Indemnitee to the Company's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall then act as Independent Counsel under Section 8(b). Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 10(a), Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). (d) The Company shall not be required to obtain the consent of Indemnitee to the settlement of any Proceeding the Company has undertaken to defend if the Company assumes full and sole responsibility for such settlement and the settlement grants Indemnitee a complete and unqualified release in respect of the potential liability. The Company shall not be liable for any amount paid by the Indemnitee in settlement of any Proceeding that is not defended by the Company, unless the Company has consented to such settlement, which consent shall not be unreasonably withheld. Section 9. Presumptions; Reliance and Effect of Certain Proceedings. (a) In making a determination with respect to entitlement to indemnification hereunder, the person, persons or firm making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 8(a) and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or firm of any determination contrary to that presumption. Neither the failure of Independent Legal Counsel to have made a determination prior to the commencement of any action pursuant to this Agreement that -4- indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination thereby that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct. (b) If the person, persons or firm empowered under Section 8 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within 60 days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided that such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person, persons or firm making the determination with respect to entitlement to indemnification in good faith requests in writing such additional time for the obtaining or evaluating of documentation and/or information relating thereto. (c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in Good Faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe his conduct was unlawful. (d) For purposes of any determination of Good Faith, Indemnitee shall be deemed to have acted in Good Faith if Indemnitee's action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers, agents or employees of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser, financial advisor or other expert or professional selected with reasonable care by the Enterprise. The provisions of this Section 9(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. (e) The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Section 10. Remedies of Indemnitee. (a) If (i) a determination is made pursuant to Section 8 that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely -5- made pursuant to Section 7, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 8(b) within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5, Section 6, the last sentence of Section 8(b) or the last sentence of Section 17(g) within 10 days after receipt by the Company of a written request therefor, or (v) payment of indemnification pursuant to Section 3 or Section 4 is not made within 10 days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication by the Court of Chancery of the State of Delaware of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 10(a); provided that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his rights under Section 5. The Company shall not oppose Indemnitee's right to seek any such adjudication or award in arbitration. (b) If a determination shall have been made pursuant to Section 8(b) that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 10 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. (c) If a determination shall have been made pursuant to Section 8(b) that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 10, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statements not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law. (d) If Indemnitee, pursuant to this Section 10, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all expenses (of the types described in the definition of Expenses in Section 17 of this Agreement) actually and reasonably incurred by him in such judicial adjudication or arbitration unless it shall be finally determined by the court or arbitrator before which such claim was brought that it was brought in bad faith. Even if it shall be determined in such judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be paid in full. (e) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 10 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and hereby stipulates, and shall so stipulate in any such court or before any such arbitrator, that the Company is bound by all the provisions of this Agreement. -6- Section 11. Nonexclusivity; Insurance; Subrogation. (a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Company's Certificate of Incorporation, the Company's Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company's Certificate of Incorporation, Bylaws and this Agreement, it is the agreement and intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy. (b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. (c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. (d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided hereunder) hereunder if and to the extent that Indemnitee has otherwise theretofore actually received such payment under any insurance policy, contract, agreement or otherwise. (e) The Company's obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually theretofore received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. -7- Section 12. Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (i) 10 years after the date that Indemnitee shall have ceased to serve as a director or officer of the Company (or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that Indemnitee served at the request of the Company); or (ii) the final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 10 relating thereto. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his heirs, executors and administrators. Section 13. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (i) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (ii) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (iii) to the fullest extent possible, the provisions of this Agreement (including without limitation each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby. Section 14. Exception to Right of Indemnification or Advancement of Expenses. Notwithstanding any other provision of this Agreement, but subject to Section 10, Indemnitee shall not be entitled to indemnification or advancement of Expenses under this Agreement with respect to any Proceeding brought by Indemnitee, or any claim therein, unless the bringing of such Proceeding or making of such claim shall have been approved by the Board of Directors. Section 15. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. Section 16. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. Section 17. Definitions. For purposes or this Agreement: (a) "Corporate Status" describes the status of a person who is or was a director, officer, employee or agent of the Company or of any other corporation, partnership, joint -8- venture, trust, employee benefit plan or other enterprise that such person is or was serving at the request of the Company. (b) "Disinterested Director" means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee. (c) "Effective Date" means the date first above written. (d) "Enterprise" shall mean the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary. (e) "Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel and lodging expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. (f) "Good Faith" shall mean Indemnitee having acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal Proceeding, having had no reasonable cause to believe Indemnitee's conduct was unlawful. (g) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or any affiliate thereof or Indemnitee (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. The Company shall promptly pay the reasonable fees and expenses of the Independent Counsel referred to above and shall fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. (h) "Proceeding" includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action taken by him or of any inaction on his part while acting as director or officer of the Company, or by reason of the fact that he is or -9- was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification or advancement of expenses can be provided under this Agreement; except one initiated by a Indemnitee pursuant to Section 10 to enforce his rights under this Agreement. (i) References to "other enterprise" shall include employee benefit plans; references to "fines" shall include any excise tax assessed with respect to any employee benefit plan; references to "serving at the request of the Company" shall include any service as a director, officer, employee or agent of the Company that imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, as participants or beneficiaries; and a person who acted in good faith and in the manner he reasonably believed to be in the interests of the participants and beneficiaries of an employee benefit plan shall not be deemed to have acted in manner "not opposed to the best interests of the Company" as referred to in this Agreement. (j) "Affiliate" means with respect to any person or entity, any other person or entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with, such person or entity. Section 18. Enforcement. (a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to continue to serve as a director and/or officer of the Company, and to serve upon any committee of the Board of Directors of the Company as requested by such Board, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director and/or officer of the Company and a member of any such committee. (b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof. Section 19. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. Section 20. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter that may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation it may have to the Indemnitee -10- under this Agreement or otherwise, except to the extent the Company is materially prejudiced by such failure. Section 21. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom the notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: (a) If to Indemnitee, to: 20 Cairns Blvd. Barrie, Ontario L4M 4S5 Canada (b) If to the Company, to: InterTAN, Inc. 279 Bayview Drive Barrie, Ontario L4m 4W5 Canada Attention: Senior Vice President, Secretary & General Counsel or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be. Section 22. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s). -11- Section 23. Governing Law; Submission to Jurisdiction; Appointment of Agent for Service of Process. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 10(a), the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the "Delaware Court"), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to and submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not a resident of the State of Delaware, irrevocably CT Corporation, 1209 Orange Street, Wilmington, Delaware 19801 as its agent in the State of Delaware as such party's agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or otherwise inconvenient forum. Section 24. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. All references in this Agreement to Sections shall be deemed to be references to Sections of this Agreement unless the context indicates otherwise. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. InterTAN, Inc. By: /s/ Jeffrey A. Losch ----------------------------- Jeffrey A. Losch Sr. Vice President, Secretary & General Counsel /s/ Heinz Stier ----------------------------- Heinz Stier -12- EX-10.C 5 dex10c.txt EMPLOYMENT AGREEMENT B/W INTERTAN & FLINK Exhibit 10(c) [logo] INTERTAN, INC. 3300 Highway # 7, Suite 904, Concord, Ontario L4M 4K3 BRIAN E. LEVY President Chief Executive Officer Tel. (905) 760-9708 Fax (905)760-9723 March 21, 2002 Mr. Michael Flink 11267 Newberry Drive Frisco, Texas 75035 Dear Michael: On behalf of InterTAN, Inc. (the "Company"), I am pleased to hereby offer you the position of Executive Vice President, Merchandising & Marketing. Your compensation and benefits will be as described below. Please note that your base salary and bonus base will not be subject to adjustment until July 1, 2003 at the earliest. You agree to devote your primary working time, skill, attention and best efforts to the business of the Company at the Company's Barrie, Ontario office or in such other position or office as the Chief Executive Officer of the Company may designate from time to time. All annual amounts are subject to pro rata adjustment to your actual start date, which is expected to be by or before April 15, 2002. All dollar amounts of pay herein are denominated in Canadian dollars. Base Salary: During the term hereof, $496,000 per year payable in accordance with the Company's normal payroll procedures. Base salary will remain the same for the fiscal year July 1, 2002 to June 30, 2003 (FY2003). Base salary for the year FY 2004 and beyond will be as approved by the Company's Board of Directors (the "Board") but in no event shall be less than $496,000. Bonus Base: Your bonus base for FY2003 will be $198,500 and subject to annual review to annual review in respect of subsequent fiscal years but shall not be less than $198,500. Your bonus may be subject to change, either up or down, depending upon and corresponding to the Company's actual operating performance as compared to the budget for the fiscal year in accordance with and as determined by the applicable and annual bonus plans duly approved by the Board of Directors. Notwithstanding the above, you will be entitled to receive a bonus payment (a pro-ration of the annual amount of $190,000 for the period from your actual start date to June 30, 2002) of X times in respect of FY2002, where "X" is the percentage of the Company's actual achievement of net profit in FY2002 to budgeted net profit for FY2002. Stock Options: You will be granted an option to purchase 20,000 shares of the Company's stock under the InterTAN, Inc. 1996 Stock Option Plan. The exercise price will be the fair market value of the stock (i.e., NYSE closing price) on the date of the grant. The grant date will be the date the grant is approved by the Board, which is anticipated to be at their earliest convenience. Company Car: You will be provided with a company car for your use that is consistent with Company policy. Insurance, maintenance and operating costs will be administered in accordance with the Company's policy. Severance Benefits: If your employment is terminated for any reason other than your voluntary resignation from the Company, for "cause" or your death or disability, you shall be entitled to receive severance benefits in an amount equal twelve months of your then current base salary and the bonus base which would actually be payable under your then current bonus formula. "Cause" shall, for the purpose of this letter, have such meaning as commonly recognized under the employment laws of the Province of Ontario. Change of Control: In the event that there is a Change of Control of the Company ( the occurrence of an event as indicated in Section 8.5 of the Company's Deferred Compensation Plan), and if, within 18 months of such Change of Control, your employment is involuntarily terminated or there is a material reduction in the scope and level of your responsibilities, duties or the effective authority associated with your position, you shall be entitled to receive severance benefits in an amount equal to 12 months of your then current base salary and base bonus, payable in one single lump sum payment, and shall be entitled to the continuation of company-paid health, dental and life insurance (then in effect, whether group or non-group) benefits for such 12 month period. Deferred Compensation Plan: Subject to the following and solely at the Board's discretion, you may be eligible to be designated as a Participant in the Company's Deferred Compensation Plan ("DCP"). I will submit your name to the Board for consideration to be designated as a DCP Participant and your "Plan Benefit Amount" (as such term is defined in the DCP) will be set at five times your then base salary plus base bonus, $CAD3,473,000, and will be subject to the terms of the DCP in effect from time to time. Stock Purchase Plan: You will be eligible to participate in InterTAN, Inc.'s Stock Purchase Plan ("S.P.P.") on the terms and conditions of the S.P.P. in effect or as amended from time to time. Group RRSPs: You will be entitled to participate in this plan to the same extent as other members of the Company's Executive Management in accordance with the Group RRSP Plan's terms. Relocation: Provided you move your primary residence to the greater Barrie area or the Greater Toronto Area by June 30, 2002, the Company will reimburse reasonable moving expenses including the portion of closing costs on your former and new domicile associated with documentation and legal fees, however excluding mortgage interest, "points", or amounts of a similar nature, provided that such expenses are pre-approved by the Company. The company will pay realtor commission (not more than 6%) on your home in Texas. The Company requires three estimates on moving from a common carrier. The Company reserves the right to choose vendors. The Company will also pay such reasonable professional fees (legal and financial) as are reasonably required in order for you to establish Canadian residency and have the right to work in Canada. Insurance: You will be entitled to participate in the Company's various insurance plans in accordance with their respective terms. You will be provided with life insurance (three times annual base salary) and long term disability insurance, provided that you qualify with the insurance carrier's underwriting requirements. The Company will pay the same proportion of your total premium for each type of insurance as provided to other members of the Executive Management. Vacation: You will be entitled to four weeks vacation per year. This program will be administered accordingly to Company policy. No carry-over of unused vacation time. If the foregoing accurately sets forth our understanding, please acknowledge below and return a copy of this letter. Sincerely, InterTAN, Inc., /s/ Brian E. Levy Brian E. Levy President and Chief Executive Officer ************ Accepted and agreed to this 27th day of March, 2002. /s/ Christina Redder /s/ Michael D. Flink - ------------------------------- ------------------------------- Witness Michael Flink -----END PRIVACY-ENHANCED MESSAGE-----